Income Tax Appellate Tribunal - Delhi
I.D. Gupta vs Income-Tax Officer on 14 December, 1990
Equivalent citations: [1991]36ITD445(DELHI)
ORDER
K.S. Vishwanathan, Vice President
1. This appeal, filed by the assessee is against the order of the CIT under Section 263 in respect of the assessment year 1986-87.
2. The assessee is working as Development Officer in LIC. During the accounting year relevant for the assessment year 1985-86, apart from his salary and conveyance allowance, he had also received Rs. 44,117 as Incentive Bonus. The assessee claimed that the conveyance allowance and the additional conveyance allowance both were exempt. He had also claimed that 50% of the Incentive Bonus should be excluded from the assessment. The returns were filed accordingly which is accepted by the ITO.
3. The CIT was of the opinion that the order of the ITO is erroneous and prejudicial to revenue. He held that the assessee's claim for exemption under Section 10(74) in respect of additional conveyance allowance should be considered in the background of the instructions from the CBDT which was not done. With regard to the deduction of 50% of the Incentive Bonus the CIT held that the assessee, being an employee, was not entitled to any deduction other than the deduction under Section 16(0- Thus, he set aside the assessment order and directed the ITO to consider the admissibility of exemption under Section 10(74) only.
4. Against this order, the assessee has come in appeal. It was seriously contended that the assessee has a swell role and had two sources of income. One was the salary from the LIC for which the assessee was given the conveyance allowance and additional conveyance allowance. He had also a business of increasing the insurance business for which he was remunerated by the Incentive Bonus. In respect of the Incentive Bonus, the claim for deduction was based on a Circular of the CBDT. He also relied upon a number of decisions of the Tribunal, where the Tribunal has considered similar contentions. In view of these, he submitted that there was no error in the order of the ITO.
5.I am unable to accept the contention of the assessee that the Incentive Bonus was received in his capacity as a businessman. The assessee is a full time employee of the LIC. He has no other vocation or profession which yields him taxable income. The Incentive Bonus is also paid by the LIC for his work as Development Officer. This is made very clear by cursory reading of the scheme for providing Incentive Bonus to Development Officers. The scheme has been extracted by the Chandigarh Bench of the Tribunal in their order in the case of CIT v. Raj Kumar Sethi [1983] 14 Tax LR 266 (Chd.) at page 268. It would be seen that the Incentive Bonus was linked as a percentage of business secured by the Development Officers in excess of certain stipulated premiums. Apart from this, this issue has been considered by the Andhra Pradesh High Court in the case of K.A. Choudhary v. CIT [1990] 183 ITR 29. The High Court has held that Incentive Bonus received from LIC is part of salary. The definition of wages under the Payment of Wages Act, also indicates that Bonus is included in that definition. In that case, the assessee was a Development Officer of the LIC and he claimed certain expenses from the Incentive Bonus. The Department did not accept the claim for deduction and the assessee filed a writ. Dismissing the Writ Petition, the High Court pointed out that he received the amount as bonus because he was an employee of LIC and had formed part of his salary.
6. In view of the above decision, it would be unnecessary for me to refer to the various decisions of the Benches of the Tribunal on this point. All these decisions of the Tribunal were given before the decision of the Andhra Pradesh High Court which is directly on this point. So none of these decisions govern this issue any more.
7. The question, whether the assessee would be entitled to the deduction under Section 10(74) in respect of the additional conveyance allowance will be looked into by the ITO as per the direction of the CIT.
8. Shri Syali, appearing for the assessee, submitted that the finding of the CIT that no deduction would be admissible from the Incentive Bonus would not be correct because the assessee has to incur some expenditure in connection with the earning of the Incentive Bonus. He submitted that the expenditure which the assessee has to incur should not be considered as a deduction under Section 16(i), but as a deduction under Section 15 itself. Now, the Andhra Pradesh High Court in the case of K.A. Choudhary (supra), were disposing of a Writ Petition and they were not called upon to decide, whether there could be a deduction for a claim under Section 15 itself. In our opinion it is quite conceivable that employees who would have to incur expenditure for which they would not be eligible for any separate allowance from the employer. Take the case of an employee who under a Service Contract with the employer, has to undertake tours for consolidated sum of salary and allowance. By virtue of his contract, he has to undergo lours. Because no separate allowance is given, he cannot claim that any part of the salary is exempt under Section 10(74). In such cases, the deduction must be admitted at the point of taxation of the salary itself, i.e., the income by way of salary for the purpose of Section 15 is that part of the receipt excluding the amount of such expenditure.
9. There are analogies for this purpose in the concept of computation of business income. A business loss arising out of embezzlement by an employee is not admissible under any specific section in the Income-tax Act. Nevertheless it is now an admitted position in law that in computing the income, the loss from embezzlement can be deducted under Section 28 itself. The authority for this proposition is the decision of the Supreme Court in the case of Badridas Daga v. CIT [1958] 34 ITR 10. By extending that principle to salary income, it is possible to hold that a deduction is admissible under Section 15 itself.
10. However, the question would still remain, whether theassessee is entitled to any deduction in this case. The total bonus received is Rs. 44,117. The additional conveyance allowance allowed to the assessee is to meet the expenses incurred in connection with the development of business. If the assessee were to incur any further expenditure over and above the travelling expenditure, then and then only the assessee would be eligible for a further deduction. That deduction has got to be justified by evidence like any other assessee. For this purpose, the ITO would allow the assessee a reasonable opportunity.
11. Subject to this, the appeal stands dismissed.